Rick Goldman: We're not as poverty-proof as we think

We're not as poverty-proof as we think

Andrew Coyne finds it strange that the media is “obsessed” with the richest one percent, whereas we should be more concerned with the bottom 10%. (The problem isn’t giving people money when they don’t work … it’s taking it away when they do, National Post, November 16.) “Surely if there is a problem that merits our concern”, he writes “it is not that we have too many rich people, but too many poor”.

Coyne is treating the “rich getting richer” as disconnected from “the poor doing poorly”. In fact, the two are, of course, directly related.

As the Conference Board of Canada (not exactly a bunch of flaming radicals) pointed out in a widely-publicized 2011study, between 1976 and 2009, only the richest fifth of Canadians increased their share of national income. All other groups saw their income shares decline. Further, most gains went to a very small group which the Conference Board calls the “super rich”. The study noted that income inequality has increased steadily in Canada over the past 20 years.

In other words, a larger slice of the pie for the few at the top has meant smaller slices for those the bottom and in the middle. Coyne may be missing this connection due to an overly-rosy view of how the poor and middle-class have been faring.

Coyne accurately notes that the percentage of people falling below Statistics Canada’s Low-Income Cutoff (LICO) has declined from 15.2 percent in 1996 to nine percent in 2010, which sounds impressive. However, he fails to note that 1996 was the lowest point of an economic downturn. In fact, looking back a few years earlier we find that the percentage of persons who fell under the LICO cut-off was 10 percent in 1989. Going from 10 percent to 9 percent over two decades looks more like spinning our wheels, than impressive progress. By that measure, it will take another 180 years to eliminate poverty.

How has the middle class fared? Coyne states that median incomes have been rising steadily. However, the same Conference Board report tells us that median after-tax income for families and unattached individuals in Canada rose from $45,800 in 1976 to just $48,300 in 2009 (in 2009 dollars) – a total increase of barely 5% over more than three decades.

Statistical quibbles aside, Coyne agrees that it is troubling that so many people remain poor in a country as rich as ours, and his support for a Guaranteed Annual Income (GAI) is laudable.

International studies show that there is actually nothing complicated about tackling poverty in rich countries. A 2005 report by the Luxembourg Income Study showed that the poverty rate is simply a reflection of how much a government chooses to devote to social spending.

Indeed, it may come as a surprise that, in terms of market income (that is before taxes and government spending), the United States had a lower than average poverty rate among rich countries. However it also had the lowest level of anti-poverty spending and therefore the highest poverty rate, after taxes and transfers.

Sweden, Germany and Belgium all had higher poverty rates than the U.S. in terms of market incomes, but much lower poverty rates after taxes and transfers. (And fiscal conservatives take note: despite these high levels of social spending, each of these countries currently has a lower ratio of public debt to GDP than the United States).

Like the U.S., Canada, had a below-average poverty rate in terms of market incomes but an above-average poverty rate after taxes and transfers.

So solutions are not complicated, and, as Coyne notes, some, such as the GAI, may even end up saving us money by eliminating duplication between programs. However a big obstacle to addressing high Canadian (and American) levels of poverty and inequality may be….. inequality.

As Nobel Laureate Joseph Stilitz argued convincingly in his recent book, The Price of Inequality, and Linda McQuaig and Neil Brooks did similarly in The Trouble With Billionaires, one effect of inequality is to undermine democracy itself. The top 1% have used their political power to influence the policy agenda, which has made them more rich, which in turn gives them even more political power — and so on in a vicious circle.

Can anyone imagine our current federal government, which has cut the corporate tax rate from 21% to 15% and is now slashing spending, agreeing to an ambitious program to end poverty, however affordable it may be?

Of course obstacles are there to be overcome. And the fact that a prominent columnist such as Andrew Coyne, as well as Conservative Senator Hugh Segal, have now endorsed such a plan is a cause for some rejoicing.

National Post

Montreal Lawyer Rick Goldman lectures on poverty and inequality in the McGill School of Social Work